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Brian Roberts, chairman and CEO of Comcast Corp.
- Comcast CFO Michael Cavanaugh gave an initial indication of how Comcast's offerings might inform decisions at its newly acquired Sky.
- Sky execs expressed interest in Comcast's Xfinity xFi mobile app, which lets customers access and control their Comcast broadband service, Cavanaugh said.
- Comcast sees xFi as a differentiator that attracts and retains broadband customers.
After a blockbuster summer of media bidding, Comcast walked away with the crown jewel of British broadcasting, Sky.
Sky, a pay-TV business that serves 23 million customers in the UK, Ireland, Germany, Austria, Italy, Spain, and Switzerland, is seen as a rarity in that it owns premium content and a broadband service to distribute it. Comcast, the largest US cable-service provider, serves 22 million video customers and 26 million internet customers.
But details about Comcast's plans for Sky have been sparse. Speaking at a UBS investor conference in December, Comcast CFO Michael Cavanaugh gave an initial indication of how Comcast's offerings may inform those plans.
Sky executives expressed interest in Xfinity xFi, a mobile app that lets Comcast customers access and control their network. With xFi, customers can set up wifi networks, troubleshoot network issues, see what devices are connected to their networks, and block or pause connected devices.
Cavanaugh said Sky executives were like "kids in the candy store in terms of how can they take that and ... use it to differentiate themselves as a broadband reseller, basically in the Italian market," according to a transcript of the conference.
"In markets [where Comcast offers its X1 video platform], you hear a lot more about xFi, you see a lot of
Sky and xFi also share a history; Comcast exec Fraser Stirling, who oversees product development for xFi, worked at Sky for eight years, leading emerging product strategy and hardware.
Read more: Comcast's bid for Sky throws uncertainty into Hulu, Disneyflix and Now TV
Differentiation is important to telecom companies
The ability to differentiate their broadband product is important to telecom companies, which are increasingly concerned about retaining customers. That Comcast, the largest pay-TV provider in the US, has more broadband customers than video customers shows just how vital broadband service is to the company as traditional linear TV subscribers decline.
Sky is similar to Comcast in that it has the ability to bundle video and broadband offerings. Here, Comcast has an advantage over telcos by virtue of the coaxial cable it uses to deliver broadband. In telecom, the cheapest option for broadband access is typically DSL. DSL - digital subscriber line - is a service that's provided over a copper wire. This type of service is slow and unreliable with limited ability for streaming. The cheapest option at cable companies, on the other hand, is coaxial cable, which delivers broadband at faster speed and more reliably. Fiber is the fastest and often most costly option.
Sky has both DSL and fiber offerings, though it launched fiber-only service in Italy this year. Sky has an advantage over traditional satellite companies with its ability to bundle through Openreach, a UK telecom company that connects nearly all homes in the UK to a national broadband network.
"Sky does sort of have a double play because in the UK ... through Openreach," Greg Williams, an analyst at Cowen, told Business Insider. "The UK allows Sky to get really good broadband for cheap. The government allows it for really good rates, wholesale prices, so they get the copper connection or even the fiber connection under UK regulation."
On top of potentially building out an xFi-like product at Sky, Comcast seems eager to expand its newly acquired international footprint.
"[Sky] can expand, we think, and are trying to, in early days in Spain, and some other markets, they can expand into adjacent geographies," Cavanaugh said.